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I can't believe he'd say, "I owe you a cuban sandwich" to someone whose life-savings he presumably gambled away on options. I seriously thought this was the Oni

I can't believe he'd say, "I owe you a cuban sandwich" to someone whose life-savings he presumably gambled away on options. I seriously thought this was the Onion when I heard that. https://www.youtube.com/watch?v=VNYNMM0hXXY&feature=youtu.be&t=128 https://www.youtube.com/watch?v=VNYNMM0hXXY&feature=youtu.be...

JumpCrisscross 8y ago
> someone whose life-savings he presumably gambled away on options It’s a stupid line. But nobody with any sense has more than 5% of their portfolio in a single hedge fund.
- johnwheeler 8y ago
  Bernie Madoff wiped a bunch of people out.
  - tomp 8y ago
    Who were greedy and seeking easy profit. People go broke in casinos as well. Doesn’t make it immoral to be run a (“fair”) casino, or a smart idea to bet all your life savings.
    - SirLJ 8y ago
      Wow, easy there... a lot of ordinary people and foundations were wiped out by Bernie, not to mention other funds where clients didn't know they were investing with him...
- alexbecker 8y ago
  Lots of people have no sense though.
  - JumpCrisscross 8y ago
    > Lots of people have no sense This population tends to select itself out of the hedge fund LP investor community. (Into, for example, cryptocurrencies.)
- olliej 8y ago
  The problem is that even if they had only 5% in that fund, the way it was managed meant that they ended up owing more than was originally put in. Options (or at least naked? Ones) have unbounded loss. You can end up owing vastly more than you started off with.
  - HappySweeney 8y ago
    Only if you sell. Option buyers have a loss floor built-in.
    - olliej 8y ago
      My understanding of options was essentially that you borrow N shares of stock X with a promise to buy it back. You then sell your shares to get so many $$$ (much wow, such bankruptcy ;) ). Then later when the stock goes down you buy back N shares and pocket the difference, and use those N shares to pay back your loaned shares. The problem seems to come from selling your shares and then the stock unexpectedly (to you at least) rising so that buying back N shares costs you more money than you necessarily have. As far as I can make out the way people make “huge amounts” from options is going down that path. Are you saying that another common approach is to buy your options and instead bank on the value of the options themselves increasing? This is a legit non-sarcastic question as it literally never occurred to me to do this :)
      - HappySweeney 8y ago
        What you are describing is short-selling. An option is a contract to buy (or sell, depending on the option) 100 shares of some stock at a set price, which expires at the end of a set day (usually the 3rd Friday). This contract costs some premium, which is lost if the option expires before the owner exercises it. You can indeed make a lot of money just holding the option until it is worth more, and it can jump several multiples of the original price, especially on unexpected price movements. As the option cannot have a negative price, your losses are capped at whatever you spent on them.
mylons 8y ago
he is in the post blow-up glow. you can see he's borderline physically ill from just starting to come to grips with this.
oh_sigh 8y ago
No, the people whose money it originally was gambled it away, by giving it to him to gamble away. The minimum investment with him was $500k. I don't feel sorry for people who have that much money, but can't take a moment to understand the implications of what they choose to do with it.

JumpCrisscross 8y ago

> someone whose life-savings he presumably gambled away on options It’s a stupid line. But nobody with any sense has more than 5% of their portfolio in a single hedge fund.

johnwheeler 8y ago
Bernie Madoff wiped a bunch of people out.
- tomp 8y ago
  Who were greedy and seeking easy profit. People go broke in casinos as well. Doesn’t make it immoral to be run a (“fair”) casino, or a smart idea to bet all your life savings.
  - SirLJ 8y ago
    Wow, easy there... a lot of ordinary people and foundations were wiped out by Bernie, not to mention other funds where clients didn't know they were investing with him...
alexbecker 8y ago
Lots of people have no sense though.
- JumpCrisscross 8y ago
  > Lots of people have no sense This population tends to select itself out of the hedge fund LP investor community. (Into, for example, cryptocurrencies.)
olliej 8y ago
The problem is that even if they had only 5% in that fund, the way it was managed meant that they ended up owing more than was originally put in. Options (or at least naked? Ones) have unbounded loss. You can end up owing vastly more than you started off with.
- HappySweeney 8y ago
  Only if you sell. Option buyers have a loss floor built-in.
  - olliej 8y ago
    My understanding of options was essentially that you borrow N shares of stock X with a promise to buy it back. You then sell your shares to get so many $$$ (much wow, such bankruptcy ;) ). Then later when the stock goes down you buy back N shares and pocket the difference, and use those N shares to pay back your loaned shares. The problem seems to come from selling your shares and then the stock unexpectedly (to you at least) rising so that buying back N shares costs you more money than you necessarily have. As far as I can make out the way people make “huge amounts” from options is going down that path. Are you saying that another common approach is to buy your options and instead bank on the value of the options themselves increasing? This is a legit non-sarcastic question as it literally never occurred to me to do this :)
    - HappySweeney 8y ago
      What you are describing is short-selling. An option is a contract to buy (or sell, depending on the option) 100 shares of some stock at a set price, which expires at the end of a set day (usually the 3rd Friday). This contract costs some premium, which is lost if the option expires before the owner exercises it. You can indeed make a lot of money just holding the option until it is worth more, and it can jump several multiples of the original price, especially on unexpected price movements. As the option cannot have a negative price, your losses are capped at whatever you spent on them.

mylons 8y ago

he is in the post blow-up glow. you can see he's borderline physically ill from just starting to come to grips with this.

oh_sigh 8y ago

No, the people whose money it originally was gambled it away, by giving it to him to gamble away. The minimum investment with him was $500k. I don't feel sorry for people who have that much money, but can't take a moment to understand the implications of what they choose to do with it.